Best practices, updated every Wednesday

4 posts from March 2014

March 26, 2014

At Ark’s Legal Project Management Showcase & Workshop in Chicago on May 22, David Schaefer, Deputy Chair at Loeb & Loeb, will describe several tools his firm utilizes to make it easier for lawyers to provide clients with more accurate and reliable budgets, including the sample template below that the firm has customized for a sell-side M&A transaction. They have created similar customizable templates for other matters, including a variety of corporate, finance and real estate transactions, and commercial, IP and class action litigation. In addition to helping establish and manage the budget, the templates create a consistent approach to gathering data for historical comparison of matters. Mr. Schaefer will also discuss innovative procedures Loeb & Loeb has developed to improve the efficiency of lawyers’ budgeting time by providing staff support and combining the power of ENGAGE with the simplicity of Excel.

Panelists from four additional firms that are national leaders in the movement to provide more value through legal project management will also describe the tools, templates, and approaches that are being used at their firms:

March 19, 2014

In Part 1 of this series we focused on successful uses of contract attorneys and outsourcing, but not all experiments in this area have ended happily.

Some failures

Some participants reported that their experiments in the area had been failures:

Although we haven’t given up on them, we’ve not been successful in using lower cost associates, contract associates, or alternative track associates that give us a lower cost. There was a time when we thought that existing associates might like it if we took the demands of being on the partnership track off them, gave them a lower salary, and charged a lower rate for their work. The reason it hasn’t succeeded probably has a lot to do with people thinking they’re in the realm of second-class citizenship. Now we have more of a focus on hiring people who have the expectation of not being on the partnership track. But I think we labored under the misimpression for a couple of years that it was something that may be attractive to our existing associates.

We had a two-year experiment with the use of contract lawyers in India to lower costs. It failed.

As a result of our client interviews, we heard a lot of clients complain about our competitors who use contract lawyers. Probably the most common complaint is that they are not well managed or well supervised and that the quality of the work is extremely poor. So while the price may be low, so is the value.

Some still on the fence

We haven’t committed to it big-time yet. I think we’re open to contract attorneys. We know what the ethical standards are. For example, say we want to use somebody from India. We’ve studied what our ethical obligations are, and we know we’re going to meet those ethical obligations. Are we at the point yet where we’re ready to do a lot? No, not yet. But we are seriously considering coming up with a new category of attorney who is not on partnership track, who would be considered a contract attorney. We’re talking about hiring some younger kids and maybe bringing them in for three years as sort of an apprenticeship program, paying them less, billing them out at less, and letting the winners rise to the top.

We have some lower cost offices where it might make sense to do some of our commodity price work more efficiently and build a little warehouse of attorneys who can kind of churn through the high volume stuff, but we haven’t done anything like that yet.

Clearly, the idea of lowering costs through contract attorneys and outsourcing is here to stay. Although contract attorneys and outsourcing account for just a small percentage of annual law firm work, they can have important implications for a firm’s flexibility and bottom line. Like other tactics described in this chapter, this can lead to greater efficiency, client satisfaction, and profitability.

However, everything has costs and risks, and outsourcing work raises a number of new management challenges. On August 3, 2011, the Wall Street Journal published an article entitled “Objection! Lawsuit Slams Temp Lawyers.” It reported on a case in which:

J-M Manufacturing alleges that McDermott Will & Emery failed to adequately supervise contract attorneys who inadvertently produced privileged documents to the government… While this may be the first eDiscovery malpractice lawsuit specifically dealing with the lack of supervision of contract lawyers, it surely won’t be the last.

As of this writing, that case has not been resolved, but it has focused attention on the need to manage contract attorneys and outsourcers to assure high quality. (For more on the topic, see our 2 blog posts on Managing Outsourcing and eDiscovery.)

March 12, 2014

This two part post previews results from my book Client Value and Law Firm Profitability, which will be published this summer. All quotes are from managing partners, chairs, and other senior decision makers at AmLaw 200 firms. Each participated in 30-minute in-depth interviews and spoke freely based on the understanding that they could review their quotes before publication, but they would not be quoted by name.

One tactic that many law firms are experimenting with to lower cost is simply to pay less to get the work done. This can be accomplished by directly hiring lower-cost contract attorneys or by outsourcing this function to a growing number of legal process outsourcing firms such as Axiom, Pangea3, and Novus Law.

There is considerable evidence that this trend is growing. In their 2014 Client Advisory, Hildebrandt Consulting and Citi Private Bank reported that in the 10 years from 2002 to 2012, the percentage of “temporary/other” lawyers in large firms grew from 2.4% to 6.1% (p. 7). The report also noted that “In the Law Firm Leaders Survey, 82% of respondents answered that they are using temporary or contract lawyers. Additionally, 70% responded that they are using permanent, lower cost, non-partner track lawyers” (p. 6)

In our sample, 97% of the firms who discussed this issue had used contract attorneys who were paid as little as $30 per hour, and 59% had experimented with outsourcing, which can be even cheaper. About one-third of the firms are planning to increase the work done this way (31% for contract attorneys and 36% for outsourcing).

Some successes

These experiments have taken a variety of forms, some more successful than others. Here are a few of the examples mentioned by our participants:

Our staff lawyer and e-discovery business has been very successful for us, and very, very profitable.

We’ve had a discovery center alternative staffing model for a number of years. It used to be just for litigation. Now we probably have over 300 clients that run through there. It’s used for everything from government investigations to contract reviews, real estate projects, and M&A due diligence. One of these days, we’ll probably open a second center somewhere else, because we’re at capacity.

We have a contract counsel manager in our firm. We have both direct hire and indirect hire contract counsel. For indirect hire contract counsel, we have relationships with various staffing firms, for large due diligence document review and e-discovery type projects. But we also have our direct hire contract counsel program, where we hire principally alums: people who have dropped out of the regular work force to raise a family or for health or other reasons, but want to do some work. They’re fine lawyers. We developed what we call our “law firm in a box.” We can drop an office into their home. It has a voice over internet phone with a black box computer attached to the back of it. All they have to do is plug the keyboard, terminal, mouse, and printer into the phone, plug the phone into a high speed internet connection outlet in their home, hit a button, and they are a firm office. They can work from home with full functionality.

We have implemented what we call staff attorneys. We are crawling before we walk. We have probably hired eight staff attorneys over the last two years. We really want it to succeed, and so we’ve been careful. Ironically, we’re probably more careful in hiring those people than we are with our full-time associates. But I think we’ve had a good success, and relatively good acceptance among the partners of the concept, such that we will continue to roll it out over time.

We were recently involved in a large project where there were probably 40 to 50 contract attorneys. They were paid $30 an hour. But it is a challenge to align these lawyers’ expectations with reality. Not everybody is going to be on a partnership track, even if they’ve done extraordinarily well in law school, and even if they do very, very well in the law firm. Our goal will be to assure people that they have a future, set expectations, define their career path, and deliver on it. All of these goals will need to make sense inside each firm’s model. Figuring out the correct model for your firm will help in delivering value to clients, but it will be one of the toughest challenges the industry is going to face going forward.

We have non-partnership track associates who have a flexible schedule. They are employees, but they bill at a lower cost. Economically, this is incredibly sensible and works well. But one of the challenges of having non-partnership positions of people who are paid at a lower salary and having them housed in the same place as people who are making high salaries, is that you have some retention issues and morale problems.

You have to manage it properly. As with all tools, it’s not right for every job. But we do use them in areas where the work is more repetitive, and in the areas where I’m sure everybody uses contract lawyers – for outsourcing, for discovery review, electronic discovery, management, all that sort of thing.

Next week, in Part 2 of this post, we will quote some senior managers who have been less enthusiastic about this approach.

March 05, 2014

Start by asking top clients how often they would like to review the status of their matters, and whether they prefer email reports, phone calls or in person meetings. If practical, offer the matter reviews for free and repeatedly emphasize that you are doing this to assure client satisfaction at your own expense.